State Bank of Pakistan Reassures Public: Bank Deposits are Secure
In response to recent concerns circulating in certain sections of the media, the State Bank of Pakistan (SBP) has clarified that bank deposits in the country are perfectly safe, assuring the public that there is no reason for alarm.
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The reassurance comes following statements made by Deputy Governor of SBP, Dr. Inayat Hussain, during a meeting of the Senate Standing Committee on Finance and Revenue. Some media outlets had suggested that bank deposits exceeding Rs500,000 within the Pakistani banking system were at risk. However, SBP firmly stated that the nation’s deposits are secure, thanks to Pakistan’s robust banking system operating under a comprehensive regulatory and supervisory framework.
Key highlights of the SBP’s statement include:
Strong Financial Health of Pakistan’s Banking System:
The SBP emphasized that the country’s banking system is adequately capitalized, highly liquid, and profitable, with a low level of net non-performing loans. In the first half of the current year (CY23), the sector recorded a robust profitability of Rs284 billion, marking a remarkable 125 percent increase from the same period in CY22.
Enhanced Capital Adequacy:
The improved earnings have bolstered the capital reserves of banks, resulting in an increase in the Capital Adequacy Ratio (CAR) of the banking sector. As of June 2023, the CAR stood at 17.8 percent, a significant rise from the 16.1 percent reported at the end of June 2022. This CAR comfortably exceeds SBP’s minimum regulatory requirement of 11.5 percent and the international standard of 10.5 percent, indicating a strong financial foundation.
Greater Resilience to Shocks:
With the enhancement of solvency buffers, the banking sector’s ability to withstand severe economic shocks has also improved, further reinforcing the stability of the financial system.
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Deposit Protection Corporation (DPC):
In addition to the strength of the banking system, the SBP highlighted the role of the Deposit Protection Corporation (DPC) in safeguarding deposits. The DPC provides insurance coverage of up to Rs500,000 to every depositor, aligning with global best practices and trends. This insurance coverage ensures that depositors’ funds remain protected even in the unlikely event of a bank failure.
Immediate Availability of Insured Amounts:
The SBP clarified that in the unfortunate event of a bank failure, the amount insured by the DPC becomes immediately available to depositors. Furthermore, the remaining portions of deposits are also recoverable through a regulatory-assisted process as the troubled bank is resolved.
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Currently, a substantial 94 percent of depositors are fully protected under the provisions of the Deposit Protection Act of 2016, underscoring the effectiveness of the deposit protection measures in place.
The State Bank of Pakistan’s comprehensive statement serves to reassure the public and reaffirm the safety and stability of the nation’s banking system, emphasizing the importance of trust and confidence in the financial sector.
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